Lighting costs, as all warehouse managers know, often form the lion’s share of running costs (stock holding costs excluded) yet while many are aware of the substantial advances in lighting technology over the last 10 years only a minority of them have taken advantage to invest in solutions that typically yield a one to three-year payback, while in some cases a deal with a lighting supplier can avoid capital outlay and still receive revenue on energy savings.
Part of the problem is the landlord-tenant relationship where the energy generated for lighting comes from solar panels. Other obstacles seems to be the time spent on identifying energy-saving solutions and justifying the capital expenditure, all of which are soluble.
If solar energy in warehouses is to take off then landlords and tenants need to address the differences between them and to this end the Government has set up a task force to encourage congress between the two often adversarial parties. On the landlord side, they are worried over insurance issues because sometimes panels get hot and there are new issues about leasehold warranties. Their other concerns could arise over roof loading rates, which may mean roof repairs are needed. This problem, however, could be overstated because panels are much lighter than they used to be. If a tenant has only two or three years left on the lease then there would be little or no incentive to pay for and install the panels so the negotiations need to ensure such costs fall, at least partially, on the landlord who will, after all, benefit for many years to come when new tenants move in.
If landlord and tenant can agree on new panels, which are continuing to fall in price, then the tenant can look forward to an investment return of 8% to 15%, despite the changes in Feed-In Tariffs. If to that the occupier invests in new lighting, particularly LEDs, then the case for action becomes much more compelling. Yet, despite a change in the law in 2011 to make it easier to make energy-saving changes to buildings, there has been little change in galvanising the market into action. Only 20% of solar energy generated in the UK derives from commercial buildings.
The case for investment in much more efficient lighting is much easier to justify as there are usually few, if any, significant landlord objections and none at all for warehouse free holders. The biggest obstacle to investment posited is justifying the capex but it is difficult to see why given the quick paybacks of one to three years, especially with smart LEDS, and the generous government incentives for SMEs. But a word of caution. It can pay to obtain many quotes for various lighting technologies. DHL did just such an exercise, inviting 50 suppliers to discuss their ideas through a tender process. Solutions from 20 suppliers trialled in a Belgian warehouse unsurprisingly showed LED lights as the lowest energy option for the long-term but the eye opener was the 27% variance in total cost of ownership among the top six fluorescent providers.
For the small to medium (SMEs) the capex issue is less pressing. The Carbon Trust, for example, offers zero per cent loans throughout the UK but there is no company size limit if businesses are located in Wales and Northern Ireland. Loans of up to £100,000 are on an unsecured basis over a 12-48 month period. The loans can pay for themselves by offsetting repayments against monthly energy savings. Free advice is also on hand from the Carbon Trust, and another useful source of help is UKWA. The other main government incentive is the Enhanced Capital Allowance Scheme, part of the Government’s programme to manage climate change. This provides 100% first-year capital allowances on investments in energy-saving equipment against taxable profits.
In any cost justification exercise on lighting, however, it is important to include all the other potential savings outside of energy savings. LEDs, for example, when compared with other lighting forms, like metal halide, are much longer lasting and so they can sharply cut the cost and risks of accidents. Disposal costs should be factored in because traditional lights contain hazardous material like mercury. Owing to their better light quality, LEDs can also help older forklift drivers because they need much more light than young drivers.
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